Importance of saving money
As the famous saying goes, “Do not save what is left after spending; instead spend what is left after saving.” Saving money shapes the pathway to a prosperous future and shapes your life as desired by you. It is essential for strengthening your financial position. It reduces uncertainties and provides opportunities for commencing a quality life in the long run. If you wish to instill this custom, we will guide you on how to save money most strategically.
Saving money is one of the most important financial habits you should adopt to secure your future. However, you may wonder about the reasons behind saving money. Firstly, it provides a sense of financial assurance. You need money from time to time to address financial emergencies.
Additionally, accounts like Digital Bank Account can help you pay off your debt and even manage your financial goals seamlessly. For instance, it may help you trail a career that you have always yearned for.
The benefits of saving money are aplenty, and thus we have listed below eight ways to save money.
8 simple ways to save money
Have you always wanted to save that hard-earned money but always ended up splurging? We have all been there to sell in the nearest shopping mall or lend a specific amount to a friend who is in need.
However, the appropriate time to save funds is NOW, and here are a few manageable tips on saving money to help you get started.
1. Track your expenses
Before you start saving, you need to know what your daily expenses are. Keep a record of all the items and services you spend your money on, including all the utility bills.
It will help you understand your spending habits and cut down on expenses that are not essential for you. For this, you can check all your account statements and then categorize them accordingly.
You may also use a budgeting app to make it hassle-free for you.
2. Budget for savings
After you understand your total expenditure, it will help you better understand how to save money. Budgeting allows you to create the perfect balance between savings and expenditure.
You can use the 50-30-20 rule to streamline the process. 50% of your savings should meet your essential expenditure, 30% towards occasional expenses that fulfil your wishes, and 20% of your income should be strictly saved.
Deduct your total expenditure from your income. Make sure that you also include expenses that do not occur frequently, such as the cost of a medical check-up or any emergency.
Always attempt to stick to the budget you have assembled for yourself and contribute something to your savings account. Kotak Mahindra has now introduced the zero balance savings account, which requires you to maintain any minimum balance. Thus, you can use this account more flexibly.
3. Find ways you can cut your spending
If your expenses increase, it is time to cut down on unnecessary expenditure. You can spend less on luxury products or entertainment. Here are a few tips for saving money:
- Cancel memberships and subscriptions that do not provide any value.
- Remove your debit/credit card information from shopping sites since they make checking out easier.
- Reduce your frequency of eating out.
- Remember to use discount coupons while shopping for your daily needs and items.
- Set an expenditure limit while shopping.
- Set a few days in a month where you do not shop at all. It is the best way to cut down on any non-essential expenditure.
However, try to curate money-saving ideas that are easy-to-follow and realistic.
4. Set your saving goals
Sometimes, it is essential to set a goal to save money. Think about what you want to do with the money that you have saved. You can plan to take a vacation to the place you have always longed to visit of a destination wedding. Then, you can calculate and follow the money-saving tips accordingly.
The amount of money that you need to save is dependent on your short-term or long-term goals. Short-term goals can be achieved within 1-3 years, whereas long term goals take a more extended period (more than four years) to fulfil.
Vacations and down payments for four-wheelers are instances of short-term goals, while education plans for your child, down payment for a house, and retirement plans are all instances of long-term goals.
Reaching the targets that you have set for yourself can boost your efforts to save money.
5. Decide your priorities
It is essential to set your priorities right. The way you allocate money to your savings is entirely dependent on your goals. For instance, if you plan to save for your retirement, you should refrain from squandering your money on short-term goals.
6. Pick the right savings tool
Here are various ways to save money and start investing. A basic savings account is an excellent place to start. You can deposit your emergency funds here so that you can access them anytime you want.
On the other hand, most investment choices require you to deposit your money for a fixed period. You must pay a fine for pre-mature withdrawal from a savings bank account.
If you decide to invest your money, you need to select the right savings tools while keeping your income in mind. Additionally, it would help if you also considered the impending market risks associated with such investment tools.
7. Make savings automatic
Most banks offer automated transfers. A certain amount of your savings will directly be deducted from your account and deposited as Standing instructions, Recurring deposits through Systematic Investment Plans.
8. Watch your savings grow
You need to review your progress at regular intervals. It will help you to understand your financial status and make changes accordingly. Additionally, if you want to grow your money safely, you can keep funds in a high-yield savings account.
Those mentioned above are some of the best ways to save money that will help you improve your financial health in the best possible way.
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This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees, and contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.
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